2. A large company needs to finance a ten-year project recently approved by its board of directors. The estimated cash flow for this project is the following (in millions of dollars). Year 1 2 3 4 5 Cash -$40 -$20 -$5 -$10 $10 $7 $20 $20 $30 $40 6 7 8 9 10 The company has a capital of $10 million to invest on this project and can finance the rest through three types of loans. Loan Term Interest rate Limit (in millions) Long-term Medium-term Short-term $50 Year when loan can be taken 1 1 and 6 1 to 10 10 years 5 years 1 year 3% 5% 8% $10 Any money left after the end of a year can be put in a money market account that gives a 0.5% of interest per year. All loans are available to meet any cash obligations in the the year when the loan is taken. Loans must be paid in full at the end of their term. For instance, a 5-year loan taken on year 1 must be paid back in year 6. The company would like to determine the optimal way of financing this project. a. What is the total amount that the company must pay on interest in order to finance the project? b. What is the projected cash at the end of year 10? 2. A large company needs to finance a ten-year project recently approved by its board of directors. The estimated cash flow for this project is the following (in millions of dollars). Year 1 2 3 4 5 Cash -$40 -$20 -$5 -$10 $10 $7 $20 $20 $30 $40 6 7 8 9 10 The company has a capital of $10 million to invest on this project and can finance the rest through three types of loans. Loan Term Interest rate Limit (in millions) Long-term Medium-term Short-term $50 Year when loan can be taken 1 1 and 6 1 to 10 10 years 5 years 1 year 3% 5% 8% $10 Any money left after the end of a year can be put in a money market account that gives a 0.5% of interest per year. All loans are available to meet any cash obligations in the the year when the loan is taken. Loans must be paid in full at the end of their term. For instance, a 5-year loan taken on year 1 must be paid back in year 6. The company would like to determine the optimal way of financing this project. a. What is the total amount that the company must pay on interest in order to finance the project? b. What is the projected cash at the end of year 10